In the Institute for Innovation Development’s ongoing interviews with active asset managers, we are seeing a growing trend of portfolio construction exploration and experimentation driven by the aftermath of the 2008 financial crisis. Many have taken Modern Portfolio Theory and other traditional methodologies and have, in essence, blown them up, and are now reassembling the pieces into new types of investment strategies and risk management approaches.
It’s interesting timing that YCharts just announced its new Model Portfolios feature that can be leveraged to visualize portfolio analysis, share ideation with clients and prospects, and monitor portfolio performance on an ongoing basis on any device, at any time, in any place. We decided to dig further and ask Caleb Eplett, VP of product management at YCharts, some more behind-the-scenes questions on the thinking behind building the added technology enhancements into the company’s FinTech research platform.
Bill Hortz: What inspired you to build this new feature onto your investment research platform?
Caleb Eplett: Over the last several years, YCharts has attracted clientele that employ a thoughtful process in making investment decisions. As our product offerings have continued to expand, we’ve remained focused on a single mantra: “enabling smarter investment decisions.” Investment professionals are facing more competition than ever before, and it’s driving a need for increased differentiation and value delivery. In talking to our clients and surveying the technology resources available, it became clear what the market was asking for: a solution for developing and analyzing portfolios with the same ease and intuitiveness as you get when evaluating a single security in YCharts. We built Model Portfolios as a tool for gauging the impact of new ideas once incorporated into an existing portfolio and a medium for explaining these results to clients, who ultimately benefit from an elevated strategy.
Hortz: How did you go about developing your new Model Portfolio functionality?
Eplett: We didn’t set out to build a better hammer. Instead, we started by compiling a list of all the use cases that we’ve heard requested of YCharts and other tools, making an effort to really understand the pain points with existing processes. We coupled that data with the feedback we’ve collected about YCharts’ existing tools, then sought out ways to capture the benefits our clients referenced most and incorporate those into our solution. To start, we developed a simple way for our users to group and weight securities in a portfolio. Then, we built that portfolio into the user’s account as a living and breathing security that could be analyzed, similar to a stock or mutual fund. Model Portfolios was a considerable undertaking, and we still have a ton of exciting evolutionary features on our roadmap. By taking this route, we’ve supplied our users the best of both worlds - portfolio-level functionality with all the analytical capabilities expected on an individual security.
Hortz: How does your research platform enable an advisor to “say goodbye to complex formulas”?
Eplett: YCharts is simple to use while offering complex detail and thorough analysis capabilities. That’s been our goal with all of our applications, and Model Portfolios is no different. Traditionally, to get the same level of detail now provided by YCharts on a model portfolio, an analyst would need to pull all sorts of data into a spreadsheet and perform some complicated calculations. They’ve often had to turn to Excel spreadsheets to achieve the level of analysis and customization they require. While extremely powerful, Excel is not always conducive to quickly switching between diverse data sources and easily building, tracking, or answering questions about strategies. We’ve reduced the effort to just a few inputs. Once a model portfolio is built on YCharts, an advisor can then evaluate the allocations, fundamentals, exposures, risk, performance, and other data, as well as compare it to other portfolios or securities in our charts and tables. Model Portfolios will add to the already reported 4+ hours our data and tools save clients every week.
Hortz: Can you give us an example or use case of how Model Portfolios empowers easier and more robust model portfolio creation?
Eplett: Imagine wanting to compare two portfolios to understand their asset allocations and risk exposure. Now, swap out a few holdings in one of the portfolios to see how that would better suit your client’s risk tolerance and re-evaluate. This can now all be done, on-the-fly, wherever you are, in minutes using YCharts.